I think the precise wording is that a Class1 medical may be used for Class 2 privileges and validities. In other words, yes, when it lapses it may be used as a Class 2 for as long as that Class 2 would be valid.
About getting a Class 1 back again, normally you can just renew it when you want it; I've done so. However, there is a limit after which you have to go back to Gatwick for another initial Class 1. I believe that limit is 5 years, but I'm not certain. Be patient; one of the AMEs on here will know.